Australia Metals & Mining: Lithium sector returning to growth as price outlook softens; Preview Sep-Q; Buy IGO, Sell PLS

We incorporate our recent global team lithium supply/demand update, with the global market to move from 16% deficit in most of 2026, to nearly balanced in 4Q26, and 8-18% surplus in 2027-2028E, driven by stagnant apparent demand growth in 2027-2028E, as the underlying growth rate in EV and ESS softens, with restocking tapering. On supply we see 32% growth in 2027E and 19% in 2028E, driven by projects in China, Africa, and Australia. Combined, this sees a moderate surplus in 2027E as the market recovers from deep deficit and a range of supply and demand uncertainties persist;